Case Summaries

First Circuit Rules that Scrap Tire Company is “Shipper” for Liability on Bill of Lading Despite Not Arranging Shipment – Mediterranean Shipping Company (“Mediterranean”), the Plaintiff, initiated an action against Best Tire Recycling, Inc., (“Best Tire”) to recover demurrage charges, port storage charges, and administrative fees accrued because a shipment of scrap tires sent from Best Tire’s storage facilities in Puerto Rico to Vietnam arrived late and would not be accepted by the consignee. The District Court ruled against Best Tire on summary judgment because Best Tire was named as the shipper on the bills of lading issued by Mediterranean. On appeal, Best Tire argued that because it was not the party that actually arranged the shipment, it could not be held liable and was not correctly designated as the shipper. Rather, Best Tire’s client who had asked it to ship the scrap tires, had contacted Mediterranean and arranged for the shipment. However, the First Circuit Court of Appeals affirmed the District Court’s decision. The Circuit Court reasoned that though Best Tire had not arranged the shipment, it was on notice that it had been designated as the shipper on this bills of lading and admittedly took no action to refuse this, despite that being available to it. The Circuit Court concluded that, based on Mediterranean’s contract, Mediterranean could hold both Best Tire and its client jointly and severally liable for all charges that arose from the shipment. Mediterranean Shipping Co., S.A. v. Best Tire Recycling, Inc., 848 F.3d 50 (1st Cir. 2017).

Competitive Sailor Wins $1.5 Million in Jones Act and Unseaworthiness Claims, Cannot Receive Prejudgment Interest on Loss of Future Earnings – Kenneth Nevor, the plaintiff, was a professional racing sailor preparing a sailing ship for a regatta in the Caribbean when he was permanently injured while attempting to transfer from his employer’s racing vessel to a support vessel to be brought back to shore. Nevor filed suit against his employer, Moneypenny Holdings, LLC, (“Moneypenny”) alleging negligence under the Jones Act and unseaworthiness. After a bench trial, the District Court awarded Nevor approximately $1.5 million for loss of earnings, loss of future earnings, and pain, suffering, and mental anguish, along with $850,000 in prejudgment interest, which Moneypenny appealed. The First Circuit Court of Appeals affirmed the District Court’s award of damages based on the clear error standard of review, giving the fact finder wide discretion. The First Circuit found that the economic and non-economic awards have sufficient grounding in the record, as did the District Court’s refusal to accept Moneypenny’s proposed mitigation defense. On the matter of prejudgment interest, however, the First Circuit partially affirmed and partially reversed the lower court. Relying on Atlantic Sounding Co. v. Townsend, 557 U.S. 404 (2009), the Court affirmed the lower court and found that the Jones Act does not deny the availability of prejudgment interest as would normally be available on an unseaworthiness claim. It also noted in an analogy to combined state and federal claims that a defendant cannot use a more restricted remedy on one claim to prevent a more expansive remedy. However, the First Circuit also decided that prejudgment interest can only be awarded for damages that have already occurred and thus were not available for loss of future earnings. Nevor v. Moneypenny Holdings, LLC, 842 F.3d 113 (1st Cir. 2016).

Second Circuit Rules that Pollution Insurer Not Required to pay Investigation and Defense Payments in Excess of Primary Policy Limit – American Commercial Lines (“ACL”) and its excess insurers, filed suit against its primary insurer, Water Quality Insurance Syndicate (‘WQIS”), to pay for investigation and defense costs related to an oil spill under a marine insurance policy. The policy in question provided $5 million in coverage for discharge of oil per ship, and a separate clause which provided coverage for costs and expenses incurred by ACL investigate and defend liabilities under the main coverage. In partially vacating the District Court’s award to plaintiffs, the Second Circuit found that the wording of the insurance contract was ambiguous as to whether WQIS had to continue to pay investigation and defense costs after the $5 million policy limit was reached, which required the Court to look outside the agreement to determine the intent of the parties. Based on the conduct of ACL, its excess insurers, and WQIS in responding to the oil spill, the Second Circuit concluded that there was extrinsic evidence of the parties’ intent for the limit to apply to both lines of coverage and remanded the case to the District Court to consider this evidence. As additional matter, the Second Circuit affirmed the District Court’s summary judgment award on the matter of repudiation in WQIS’s favor. The Court affirmed that repudiation requires a refusal to perform under the contract, while WQIS merely denied liability based on the terms of the contract and thus had not repudiated the contract. Am. Commer. Lines LLC v. Water Quality Ins. Syndicate, 2017 U.S. App. LEXIS 2460 (2nd 2017).

Second Circuit Rules Confirmation of Arbitral Award Unnecessary for Enforcement and Allows Plaintiff Corporation to Pursue Fraudulent Transfer and Veil-Piercing Claims – CBF Industria de Gusa, a Brazilian corporation in the business of producing and supplying “pig iron,” (“CBF”) brought this action to enforce an arbitral judgment awarded by the ICC Paris against now-defunct Steel Base Trade, AG (“SBT”), AMCI Holding, Inc., and various affiliated companies and their beneficial owners. The District Court both denied enforcement because CBF had not had the award confirmed by a French Court and ruled that CBF could not allege fraudulent transfer and pierce the corporate veil because of issue preclusion based on the arbitration panel’s decision. In vacating the lower court’s decision, the Second Circuit Court of Appeals determined that in an action to enforce a foreign award, plaintiffs need only bring one action for recognition and enforcement, and that the need for confirmation by a foreign court had been eliminated by the New York Convention and Chapter 2 of the Federal Arbitration Act. Additionally, it concluded that issue preclusion did not apply to CBF’s claims of fraudulent transfer because CBF had not had a full and fair opportunity to litigate the issue. SBT, AMCI Holdings, and other companies appears to have undertaken various transfers while delaying the proceeding in order to make SBT judgment proof while continuing its operations. CBF INdustria de Gusa v. AMCI Holdings, Inc. 2017 U.S. App. LEXIS 3815 (2nd Cir. 2017).

Collateral Source Rule regarding LHWCA Medical Payments – Passenger sued vessel owner for negligence related to injuries he suffered on board the vessel in rough seas. The Passenger was not a seaman and was provided coverage under the Longshore Harbor Workers’ Compensation Act from his employer. The LHWCA insurer paid all of his medical expenses for the related injuries at the discounted rates provided under the insurer’s arrangements with the medical providers. The District Court applying Collateral-Source Rule awarded to the Passenger the medical expenses as billed [100% retail charges] rather than as paid [discounted amounts paid by the LHWCA insurer]. The Fifth Circuit Court of Appeal reversed the District Court’s decision by finding that while the Collateral-Source Rule applied because vessel owner played no role in securing the LHWCA insurance coverage for Passenger, the maritime Collateral-Source Rule does not allow plaintiffs to recover the written-off amount of the medical expenses above the amount actually paid by LHWCA insurer. Specifically, the Court noted: “LHWCA medical-expense payments are collateral to a third-party tortfeasor only to the extent paid; in other words, under those circumstances, plaintiff may not recover for expenses billed, but not paid.” Deperrodil v. Bozovic Marine, Inc., 842 F.3d 352 (5th Cir. 2016).

Seaman’s Jones Act Claim rejected by Jury based on finding of No “Accident” – The Fifth Circuit affirmed a jury’s verdict that the plaintiff seaman had failed to prove he was involved in an accident onboard the vessel finding that appellate review for sufficiency of evidence was not available where no motion for judgment as a matter of law nor motion for new trial was filed by plaintiff. Fifth Circuit only reviewed challenges to jury instructions and for use of jury interrogatories for abuse of discretion. The plaintiff had failed to disclose his prior treatment for back pain at the time of hire. Furthermore, while the plaintiff claimed that he was caused to fall out of his bunk because of the decision of the captain to travel in high waves, the vessel owner/employer presented evidence that the waves were not violent and that the plaintiff did not report the accident but had told the captain his back was hurting from being seasick. Plaintiff complained that the jury interrogatories were confusing because the first question asked whether the plaintiff had “an accident,” to which the jury responded in the negative. Plaintiff claimed that the instruction was confusing because the term “accident” potentially connotes an event that occurs without fault, when the Pattern Jury Instruction on negligence covers whether an accident occurred. The Fifth Circuit found no abuse of discretion for the use of the jury interrogatory about whether plaintiff had “an accident” when read in conjunction with the rest of the jury instructions. There was no support offered by the plaintiff that a layperson’s use the word “accident” assumed no one was at fault, noting that most people refer to an automobile collision as an “accident” without intending to mean that no one was at fault. Bosarge v. Cheramie Marine, LLC., 2017 WL 1058911 (5th Cir. 2017). (This case was not selected for publication by the Court in West’s Federal Reporter.)

Longshoreman’s 905(b) Claim denied against Vessel Owner with No Active Control over cargo bay area – A longshoreman was injured when he slipped and fell from the side of a cargo container while he was attempting to climb to the top , without a ladder, without wearing fall-safety equipment and after a rainstorm which made the side of the container wet. The container was located on the top deck of the cargo bay of the vessel and near the edge of the top deck which had its “safety expansions” removed by the vessel owner for the cargo loading operations. The plaintiff fell a distance of ten feet to the top deck where the container was located, and then another fifteen feet past where the safety expansions would have been to the bottom deck below. The Fifth Circuit affirmed summary judgment in favor of the vessel owner based on the finding that the vessel owner had “turned over” the cargo area to the longshore crew for cargo operations and the cargo area was not under “active control” by the ship at the time of the accident despite the fact that only the ship’s crew could have replaced the safety expansions between the decks. The Fifth Circuit noted that “disallowing replacement of the safety expansion by the longshoremen is not enough to meet” the burden of showing active control. The Court further noted that the vessel owner could not have “reasonably anticipated” that the plaintiff would attempt to climb the side of the container following a rainstorm near the missing safety expansion without the use of a ladder or fall-safety equipment. Abston v. Jungerhaus Maritime Services, et al., 664 Fed.Appx. 378 (5th Cir. 2016). (This case was not selected for publication by the Court in West’s Federal Reporter.)

Longshoreman’s 905(b) Claim denied against a Vessel still Under Construction – A longshoreman was injured on board a ship that had successfully completed sea trials but was still being outfitted and inspected before final delivery. The Fifth Circuit reaffirmed that “a structure under construction remains a non-vessel until it is complete and ready for duty upon the sea” and that an incomplete ship is not a vessel under maritime law for the purposes of §905(b). Crace v. Huntington Ingalls, Inc. 2016 WL 6110040, ___ Fed.Appx. ___ (5th Cir. 2016). (This case was not selected for publication by the Court in West’s Federal Reporter.)

Fifth Circuit Again Tackles Whether Oilfield-Related Contract is a Maritime Contract – The Fifth Circuit reviewed an oral work order to perform “flow-back services” on an offshore gas well located on a platform, which work order ultimately required the use of a crane barge to perform, to determine if the work order was as a maritime contract, thus allowing for contractual indemnity between the parties under maritime law rather than such indemnity being barred under Louisiana’s Anti-Indemnity Act. Finding it to be a “close question,” the Fifth Circuit affirmed the District Court in finding that the oral work order was considered maritime. The written Master Service Contract contemplated that subsequent work orders would be issued for all aspects of the work required between the parties. The Court noted that the parties verbally arranged for the use of the crane barge to perform the needed services on a well located on a fixed offshore platform. The crane operator on the barge actually caused the accident on the platform to one of the platform workers. The vessel owner filed a Limitation of Liability action and also sought contractual indemnity based on the triggering oral work order under the written Master Service Agreement against the platform worker’s employer. The Fifth Circuit noted that it was “bound” to utilize the Davis & Sons factors when determining whether oilfield-related contracts, which had little to do with “traditional maritime activity,” were or were not maritime contracts. Finding four of the six factors of Davis & Sons favored finding that the work order was maritime in nature because the master contract contemplated the use of a vessel with insurance requirements for vessels, the vessel was used in the performance of the work order and the vessel’s equipment caused injury during the performance of the work order, the Fifth Circuit affirmed the District Court’s ruling that the contract was maritime and therefore contractual indemnity was not barred by Louisiana state law. The revised opinion was filed on March 7, 2017. A concurring opinion filed by Judge W. Eugene Davis, a long-time maritime jurist in South Louisiana very familiar with the issues related to oilfield-related contracts in maritime settings, suggested that it was time for the Fifth Circuit to reconsider en banc the issue, abandon the Davis & Sons test and simplify the test for determining what makes a maritime contract in order to allow the parties in these oilfield offshore cases to more “accurately allocate risks and determine their insurance needs more reliably.” No en banc request has been made as of the date of publication herein. In re M/V Billie Joe - Doiron v. Specialty Rental Tools & Supply, LLP et al, 849 F.3d 602 (5th Cir. 2017).

Salvor Unseaworthiness Action Dismissed Against Owner of Salvaged Barge – An employee of a company which was attempting to rescue a barge that had grounded on the banks of the Mississippi River sued his employer for injuries received during the effort. The employer/salvage company then impleaded the barge owner under Rule 14(c) asserting an unseaworthiness claim against the grounded barge, claiming that the contract was one of towage rather than salvage. Under maritime law, a vessel owner owes a nondelegable duty to provide a seaworthy vessel under towage contracts. However, a vessel owner owes no duty of seaworthiness to a potential salvor for a vessel being salvaged from a marine peril. Since marine peril existed as alleged in the Rule 14(c) tender because the barge was grounded after breaking free of its moorings and was being “rescued,” the Fifth Circuit affirmed the District Court’s holding that this was a salvage contract where no duty of seaworthiness is owed by the vessel owner to the salvors. Evans v. Vidalia Dock & Storage Company, 662 Fed.Appx. 241 (5th Cir. 2016). (This case was not selected for publication by the Court in West’s Federal Reporter.)

Knock for Knock Indemnity Provision is allowed to be reformed by the parties to include Indemnitee’s other contractors despite adversely impacting the indemnitor’s insurer – A casing contractor and an exploration company entered into a maritime Master Service Contract regarding casing operations on a drill ship. The Masters Service Contract [MSC] contained what is normally referred to as a knock-for-knock indemnity provision, wherein each party agreed to indemnify the other party for injury claims brought by their respective employees against the other party. The parties were defined to include each party’s respective “subcontractors.” An employee of the casing contractor was injured during the operation and sued the exploration company as well as other “contractors” of the exploration company. The exploration company’s other contractors sought indemnity from the exploration company under similar Master Service Contracts and the exploration company, in turn, sought indemnity from the casing contractor for its own exposure as well as for its other contractors who were seeking indemnity from the exploration company. The insurer of the casing contractor settled the claim with the employee on behalf of the exploration company, but denied coverage for the casing company’s expenditures with regards to its indemnity obligations related to the other contractors of the exploration company on the basis that these were not “subcontractors” included in the definition of “indemnitees” under the MSC. The District Court allowed for the casing company and the exploration company to “reform” the MSC to reflect the mutual intent that the knock-for-knock indemnity was to include as indemnitees, these other contractors as “subcontractors.” Noting that maritime law permitted introduction of parol evidence to demonstrate “mutual mistake” to allow for reformation, the Fifth Circuit affirmed the reformation despite its adverse effect on the interests of the casing contractor’s insurer, who was a third party to the reformation, even though federal maritime law lacked a clear rule regarding such affect. The Court noted that it was proper for an admiralty court to reference state law to “fill the gap” on the issue whether reformation was barred because of the negative impact on a third party, such as the insurer. The Fifth Circuit affirmed to District Court’s use of Louisiana law which provides that if third party insurers did not “study, review or rely” on the MSC or the contracting parties’ error in the MSC, such reformation is not barred. Richard v. Anadarko Petroleum Corp 2017 WL 835187, ___ F.3d ___ (5th Cir. 2017).

Negligence Per Se – Despite Violation of 46 U.S.C. § 8104(c) by Defendant, Judgment as a Matter of Law Ruling for Plaintiff Did Not Survive Because Evidence Could Be Construed that Underlying Accident was Faultless or Unrelated to Violation at Issue – Plaintiff and crew were in the process of separating a barge from a tugboat, which required connecting the barge to a new onshore power source using a large electrical cable. While performing the task, Plaintiff was asked to retrieve a heaving line, tying one end of it to the electrical cable, and tossing the line’s other end to an electrician on the dock. While plaintiff dealt with the heaving line, two of his co-workers dropped the electrical cable, which then slid into plaintiff’s heels and knocked him to the ground, causing injuries. Plaintiff filed causes of action for negligence, negligence per se, and unseaworthiness. His negligence per se argument was premised on a theory that the crew members involved in the incident had worked in excess of the amount permitted pursuant to 46 U.S.C. § 8104(c) (limiting seamen’s workhours to 15 hours in 20 or 36 hours in 72, except for emergencies). After the jury found unanimously in favor of the shipowner defendant on all counts, the judge granted plaintiff’s motion for judgment as a matter of law on the negligence per se theory. In doing so, the trial court concluded that a reasonable jury could find only that the crew worked “more than the hours permitted by the statute in the days leading up to Plaintiff’s accident” and that there was “no explanation except for lack of ‘immediate and wakeful readiness’ for why Plaintiff…did not extricate himself from the area where he was throwing the heaving line to shore when he recognized he would be hit by the power cable and possibly killed if the other men began moving the cable.”

On appeal from the ruling in plaintiff’s favor, the Sixth Circuit reversed. In doing so, the Court rejected plaintiff’s argument that to survive judgment as a matter of law scrutiny, he need only show “any evidence” that a violation played a role in his accident. The Court held that, despite any relaxed causation standard in Jones Act claims, for judgment as a matter of law to survive, plaintiff must show that no reasonable jury could find that statutory violations lacked any contributory role in the accident. Because the evidence could be construed by the jury that the incident was a faultless accident or an accident unrelated to fatigue, the standard for judgment as a matter of law had not been met. Ghaleb v. American Steamship Co., 2017 U.S. App. LEXIS 5645 (6th Cir. March 31, 2017).

Collateral Estoppel: Tug Owner and Master Successful in Civil Trial Alleging that they Were Negligent Could Not Be Held Criminally Liable in Subsequent Trial Asserting Similar Allegations – Following a barge explosion that led to one crew member’s death and was determined to have been caused by an individual’s use of a propane torch to warm a pump, the master of the tug that had been pushing the barge and the tug’s owner were charged with violating 18 U.S.C. §1115, which penalizes maritime negligence that results in death. A civil trial was held two years before the grand jury returned its indictment on the criminal charges. That trial sought civil damages pursuant to the same negligence theory as the eventual criminal indictment. At the conclusion of the civil trial, the judge determined that the United States had not proven its claim. Based on that decision, Egan and Egan Marine sought the benefit of issue preclusion (collateral estoppel), arguing that the United States’ failure to prove by liability by a preponderance of the evidence should be sufficient to preclude them from proceeding with criminal charges, which require proof beyond a reasonable doubt. Because the civil lawsuit addressed essentially identical allegations as the subsequent criminal case, the 7th Circuit held that the civil judgment barred the United States from pursuing the same underlying theory in the criminal context. United States v. Egan Marine Corp., 843 F.3d 674 (7th Cir. 2016).

Passenger Personal Injury: Duty of Care Does Not Include Shoreside Medevac Flights – The Ninth Circuit held that a cruise line does not have a duty to arrange for a medevac flight when a passenger is injured on shore; taking the passenger to a shore hospital with better medical facilities than the ship has is sufficient. The court affirmed dismissal of claims brought by a cruise ship passenger whose husband was injured on a shore excursion and later died from his injuries. The court rejected the assertion that the cruise line had a duty under California or general maritime law to arrange for a medevac flight to a better hospital, stating that the hospital could arrange such a flight if one were necessary. Citing Section 314(A)(1)(b) of the Restatement (Second) of Torts, the court found the cruise line had fulfilled its duty of care under California law by caring for the decedent husband until he was transferred to the hospital. Citing Chan v. Soc’y Expeditions, Inc., 123 F.3d 1287, 1290 (9th Cir. 1997), the court also found that by taking the decedent to the hospital the cruise line had exercised reasonable care under the circumstances as required by general maritime law. Because the cruise line did not owe the asserted duty to arrange a medevac flight, the plaintiffs’ claims, which included a “wrongful ejection” claim under California law, a DOHSA claim, and claims for personal injury and emotional distress, all failed. Casorio v. Princess Cruise Lines, Ltd., no. 15-56239, 2017 U.S. App. LEXIS 2758 (9th Cir. Feb. 14, 2017) (unpublished).

Longshore Act: An Administrative Law Judge Did Not Overrule a Statutory Cap by Neglecting to Apply It – An Administrative Law Judge (“ALJ”) neglected to apply the statutory cap of Section 906(b)(1) of the Longshore and Harbor Workers Compensation Act in an order that left the ultimate calculation of benefits a district director of the Department of Labor. The district director also initially failed to apply the cap, but the employer/insurance carrier only paid up to the cap. When the recipient petitioner complained, the district director amended the calculation to apply the cap. The petitioner asserted that the initial calculation was binding and sought a default against the employer/insurance carrier. The district director denied the default, and the Benefits Review Board affirmed that decision. The petitioner sought review by the Ninth Circuit. The dissenting justice found the ALJ should have applied the cap and that the employer/insurance carrier should have filed a timely motion to reconsider or amend and a timely appeal. The dissenting justice further found that the employer/insurance carrier should not have defied the ALJ’s order by only paying to the cap and that the district director exceeded its authority in amending its calculation to include the cap. The remaining justices disagreed, finding that the ALJ’s silence on application of the statutory cap did not overrule the cap and that the district director’s application of the cap in the amended calculation was a proper ministerial act. The Ninth Circuit therefore denied review of the default decision.

Washington Supreme Court Holds Punitive Damages Are Available on an Unseaworthiness Claim – The Supreme Court of the State of Washington held “that a seaman making a claim for general maritime law unseaworthiness can recover punitive damages as a matter of law.” A deckhand trainee who lost two fingers in a hatch sued the defendants, the vessel’s owner and its operator, under a theory of unseaworthiness and sought punitive damages. The defendants moved for partial summary judgment on the issue of punitive damages, urging the court to follow the Fifth Circuit’s position that such damages are not available to Jones Act seamen. See McBride v. Estis Well Service, LLC, 768 F.3d 382 (5th Cir. 2014), cert. denied, 135 S. Ct. 2310 (May 18, 2015). The court declined. Applying the rationale of Atlantic Sounding Co. v. Townsend, 557 U.S. 404 (2009), the court found that claims for unseaworthiness and punitive damages predate the Jones Act and are not preempted by it. The court also found that Townsend limited the application of Miles v. Apex Marine Corp., 498 U.S. 19 (1990), to wrongful death cases, so Miles’ holding that a parent cannot recover punitive damages for the death of a Jones Act seaman did not preclude the recovery of punitive damages on an unseaworthiness claim. Consequently, the court held that the plaintiff seaman could recover punitive damages on his unseaworthiness claim as a matter of law. The court therefore reversed the trial court’s grant of partial summary judgment and remanded the case for further proceedings. Tabingo v. American Triumph, LLC, no. 92913-1, 2017 Wash. LEXIS 328 (Wash. Mar. 9, 2017).

Submitted by Arthur A. Severance, Coastal Villages Region Fund

11th Circuit

Violation of the Seaman’s Protection Act (Whistleblowing Activities) – Petitioner, a seaman’s employer, terminated the employment of a captain in violation of the Seaman’s Protection Act , 46 U.S.C.S. § 2114. Petitioner was a tug captain for the employer. On October 12, 2010, the mate ran the barge they were towing into a dock while the Petitioner was asleep and off-watch. The mate, as well as the rest of the crew, then failed to timely report the allision. When the crew later towed the now oil-laden barge out to sea, the barge began to take on water due to a puncture from the allision. This is when employer first learned of the allision. The employer sent an investigator to determine the reason the allision had not been timely reported. The investigator determined that the Petitioner should be held responsible for the failure to report and should be discharged.

The court, however, determined that there was substantial evidence that the investigation was a “witch hunt” to support the Petitioner’s pre-determined termination. During the weeks and months prior, the Petitioner made inadequate crewing complaints to the Transportation Advisory Committee including complaints regarding inadequate lookouts, breach of the 12 hour work rule, and also advised that the employer had been dumping raw sewage into New York Harbor. The Petitioner had approached the media regarding these issues as well. The court considered these actions to be “protected whistleblowing activities.”

The Eleventh Circuit found that substantial evidence supported the conclusion that (1) the employer knew of the protected whistleblowing activities and that this knowledge was a contributing factor in the employer’s decision to fire the captain; (2) the employer did not show by clear and convincing evidence that it would have fired the captain even if he had not engaged in the protected activities; and (3) because reinstatement was the presumptive remedy, the employer was on notice that it had to overcome this presumption to prevent the captain’s reinstatement. Harley Marine Services v. United States DOL, 2017 U.S. App. LEXIS 1366, 2017 WL 370843 (11th Cir. January 26, 2017).

Cruise Line Duty of Care (Open and Obvious Condition) – The Eleventh Circuit determined that a cruise line was entitled to summary judgment in a passenger’s negligence action where the passenger allegedly broke her ankle after slipping on the nosing of a step while leaving the ship’s theater. The Court found that there was no evidence that (a) another person previously slipped on the nosing of one of the ship’s steps, (b) that the line had notice of the nosing’s slippery condition, and/or (c) that the “watch your step” sticker on the nosing of the step was intended to warn passengers that the nosing could be slippery.

The passenger filed a one count complaint alleging failure to warn of the step’s dangerous, slippery and unsafe condition. The cruise line asserted that the condition was open and obvious, and that they had no duty to warn. The Court agreed with the cruise line and held that there was no evidence indicating that the cruise line knew or should have known that the step’s nosing was dangerously slippery or even more slippery than other steps’ nosing. Succinctly, the Court ruled that the inquiry is not whether the defendant had notice of an object or its physical specifications, but instead, whether the defendant had notice of a risk-creating condition. As a result, the Court held that the evidence did not create an issue of fact, and entered summary judgment in favor of the cruise line. Taiariol v. MSC Crociere S.A., 2017 U.S. App. LEXIS 1466, (11th Cir. January 27, 2017).

Fraudulent Misrepresentation/Breach of Warranty/Products Liability – In this fraud action, the Eleventh Circuit found that the “as is” clause in a yacht purchase and sale agreement may constitute evidence against a plaintiff’s fraud allegations, but the plaintiff’s claims were not precluded as a matter of law. Plaintiff appealed from the district court’s grant of summary judgment to defendants on all but one count of plaintiff’s amended complaint. After an in depth analysis of multiple claims, the Eleventh Circuit reversed the district court’s grant of summary judgment to defendants on nearly all counts.

Plaintiff purchased a 105 foot luxury super-yacht manufactured by defendant Horizon Yacht Co., Ltd. (“Horizon “) and its wholly owned subsidiary Premier Yacht Co., Ltd. (“Premier”) in Taiwan. Plaintiff purchased the Starlight for $6,835,000 after negotiating and executing a Purchase and Sale Agreement with Seller, along with an Addendum executed shortly thereafter. That contract, as modified by the Addendum, contained a seemingly self-contradictory provision. The “as is” clause in the original Agreement stated that “upon closing, buyer will have accepted the vessel in its ‘as is’ condition. Seller and the brokers have given no warranty, either express or implied, and make no representation as to the condition of the vessel, its fitness for any particular purpose or merchantability, all of which are disclaimed.” The Addendum, however, modified this clause — providing that before the word “Seller,” “the following language is inserted: ‘Other than the limited express warranty attached here as Exhibit A.’” With this alteration, the paragraph read: “Other than the limited express warranty attached here as Exhibit A, Seller and the broker have given no warranty, either express or implied...”

Plaintiff contended that defendants made numerous false representations regarding the yacht’s condition during the negotiation of the sale. Specifically, plaintiff claims that the yacht was represented to be MCA LY2 compliant and built to DNV standards. The Defendants deny the claim, but admit that their website did indicate that the vessel was MCA compliant when it was not.

The yacht had numerous problems that sharply limited the range of the vessel to short distances and also had electrical issues that rendered it unsafe. After defendants refused to repair or address the problems under the warranty, the plaintiff filed suit against the defendants, bringing ten claims: (1) fraud in the inducement; (2) revocation of acceptance under the Magnuson-Moss Warranty Act; (3) breach of the implied warranties of merchantability and usage of trade; (4) breach of the implied warranty of fitness for a particular purpose; (5) breach of a pre-purchase express oral warranty; (6) breach of a post-purchase express oral warranty; (7) breach of the implied warranty of workmanlike performance; (8) breach of the express written limited warranty; (9) rescission of the promissory note executed with the purchase; and (10) an injunction barring defendants from foreclosing on the promissory note or taking possession of the yacht for non-payment. The district court entered summary judgment for defendants on all but two claims: the breach of express warranty claims against Horizon and Premier. The district court also entered summary judgment for Seller on its counterclaim to foreclose on the promissory note. The Eleventh Circuit reversed.

The majority of the Eleventh Circuit decision focuses on the “as is” clause and whether the clause precludes the Plaintiff’s claims. Relying on the “as is” and “entire agreement” clauses in the contract, the district court granted summary judgment in favor of the Defendants. According to the Eleventh Circuit, the district court, however, failed to recognize a Florida Supreme Court decision which held that where an agreement is procured by fraud or misrepresentation “every part of the contract” is vitiated because “[i]t is well settled that a party cannot contract against liability for his own fraud.” Plaintiff argued that the district court erred by refusing to follow the Florida Supreme Court. The Eleventh Circuit agreed finding that a contract provision, including an “as is” clause, cannot preclude a fraud claim, unless the contract expressly states that it is incontestable on the ground of fraud. The Court found that this rule was directly contrary to the district court’s holding that plaintiff’s claim were barred by virtue of the provisions of the contract. Ultimately the Court ruled that the “as is” clause may constitute evidence against plaintiff’s fraud allegations, but plaintiff’s claims are not precluded as a matter of law. Global Quest, LLC v. Horizon Yachts, Inc., 849 F.3d 1022, 2017 U.S. App. LEXIS 3372, (11th Cir. February 24, 2017).

Longshore and Harbor Workers’ Compensation Act (LHWCA) – In a negligence action brought under § 905(b) of the LHWCA after a longshoreman fell while loading cargo into a vessel, the vessel’s owner and charterer were found not liable to the longshoreman because neither the charter’s provision of a storage plan nor the supervisory presence of a port captain during loading constituted an active control duty under Scindia and this level of passive oversight was not enough to create a duty of reasonable care towards the longshoreman based on active involvement with cargo operations. The Court also found that there was no duty to intervene under Scindia because, assuming there was actual knowledge of a dangerous condition, there was no evidence that the owner and charterer had actual knowledge of the stevedore’s failure to remedy the problem.

The Court explained that ordinary negligence principles govern statutory claims brought under §905(b) and the vessel owes the stevedore and her longshoremen employees the duty of reasonable care under the circumstances. However, the Court emphasized that the ship owner is entitled to rely on the stevedore “to avoid exposing the longshoremen to unreasonable hazards,” and may otherwise expect the stevedore to “perform his task properly without supervision.”

With that said, the Eleventh Circuit recognized that ship owners owe three distinct duties, known as Scindia duties, during cargo operations: (1) the turnover duty, (2) the active control duty, and (3) the duty to intervene. On appeal, the Plaintiff alleges breach of the active control duty and the duty to intervene.

According to the 11th Circuit, a time charterer violates the active control duty if it actively involves itself in the cargo operations and negligently injures a longshoreman. Here, the Plaintiff argued that the provision of a detailed loading procedure to the stevedore and the presence of a port captain aboard the vessel during the loading process constituted active involvement in the cargo operation and created a duty of reasonable care. The Eleventh Circuit disagreed finding that the provision of a stowage plan to the stevedore is routine practice in the shipping industry and is not enough to constitute active control because “it is the stevedore, an independent contractor hired for its expertise in the stowage and handling of cargo that is charged with actual implementation of the plan.” Likewise the Court found that the presence of a port captain to observe the loading process, was passive oversight and was not enough to create a duty based on active involvement with cargo operations.

With regard to the duty to intervene, the Court stated that a ship owner has a duty to intervene and protect a longshoreman once cargo operations have begun even if it is not actively involved in those operations only if “the ship owner becomes aware that the ship or its gear poses a danger to the longshoremen and that the stevedore is failing, unreasonably, to protect the longshoremen.” The Court emphasized that the duty to intervene was exceedingly narrow. Ultimately, the Court found that even if it assumed that the Defendants had actual knowledge of the dangerous condition, the Plaintiff failed to show that the vessel owner had actual knowledge of the failure to remedy the problem. Miller v. Navalmar (UK) Ltd., 2017 U.S. App. LEXIS 6372, (11th Cir. April 13, 2017).